KPMG_CoA_LegalEntities

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KPMG_CoA_LegalEntities

  1. 1. COA and LERationalizationDuring an R12UpgradeOctober 3, 2012
  2. 2. Before we begin……© 2012 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated 1with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 112808
  3. 3. KPMG’s Global Reach We offer the benefit of working with a “Big Four” international network of member firms, drawing from the skills and experiences of 145,000 Audit, Tax, and Advisory colleagues across 152 countries Total Global Advisory Revenue of $6 Billion U.S. Advisory AMERICAS EMEA ASPAC • Approximately 7,000 dedicated professionals Over 7,000 Over 20,000 Over 5,000 dedicated dedicated dedicated • Approximately $1.7B in revenues professionals professionals professionals • Access to more than 30,000 talented professionals across a worldwide network • 100+ global methods and toolkits to bring the organization’s vast knowledge to each client© 2012 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated 2with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 112808
  4. 4. Oracle Product Experience One of the 1st to successfully implement Primary launch partner for v9.2 and Leading implementer of Oracle BI solutions, Advanced Specialization Advanced Specialization Advanced Specialization Oracle E-Business R12. foremost implementer of v9.1. including OBI EE and BI Analytic Applications. 1st to implement HCM v9.1 and 8.9. One of the 1st to implement Project and HR Analytics 7.9.6 A leader in GRC Transformation services. A preferred Fusion HCM Partner, one of Deep experience implementing Oracle EPM The 1st to successfully implement Oracle only 8 selected globally. solutions, including Hyperion and Essbase. EGRCM 8.6. KPMG is Oracle certified “Rapid Start The 1st to successfully implement HFM Fusion. Ready on Fusion HCM”© 2012 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated 3with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 112808
  5. 5. Agenda What is a General Ledger? Chart of Accounts Strategies and Principles Oracle R12 Architecture Overview Legal Entity Rationalization and Benefits Subledger Accounting Wrap-up Q&A© 2012 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated 4with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 112808
  6. 6. What is a General Ledger?What the General Ledger is – The control source for consolidation The control source for subsidiary ledger information The source for financial statements – Balance Sheet, P&L, Trial Balance A reflection of the financial organization structure of the businessWhat the General Ledger is not – An analytical tool A repository for information that is not being captured elsewhere The only place to capture data that supports analysis of profitability© 2012 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated 5with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 112808
  7. 7. High-level Reporting Requirements of a General LedgerA chart of accounts must be able to support operations and reporting for multipleorganizational dimensions:Legal External financial statements and legal entities Statutory reportingBusiness Internal financial statements for divisional and line of businessesFunctional Geographic financials Functional cost financials Product sales and cost of sales© 2012 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated 6with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 112808
  8. 8. Chart of Account Strategies for a “Thick” vs. “Thin” GL Conceptual View of a “Thick vs. Thin” G/L  A “Thick” GL accommodates most, if not Thick GL all, of the analytical dimensions as codes within the General Ledger Code Block. It Thin GL has a complex Chart of Accounts to hold General Ledger values for a broad variety of purposes and originations. Customer Vendor Project Loc Reg Org Dept Account Asset Type Order # State Empl …  A “Thin” GL houses few dimensional elements, typically those used for external reporting. It’s simple structure leverages subsidiary ledgers for transactional detail, Subsidiary Ledger Subsidiary Subsidiary Ledger and often requires analytical tools for Ledger internal reporting. Most companies have Use GL drill-down and analytical tools to migrated towards a thin GL structure over get transactional detail the last decade.© 2012 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated 7with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 112808
  9. 9. Oracle R12 Architecture: Ledgers U.S. Germany U.K. IndiaEach Primary Ledger has it’s own COA, Primary USD EUR GBP INRCalendar, Currency and Convention, 4C’s Ledger 12/31 12/31 12/31 12/31 GAAP GAAP GAAP GAAPReporting Ledger allows view of a Primary Ledger in different Germany U.K. Reporting USD USDcurrency, multiple currencies can be assigned Currencies 12/31 12/31 GAAP GAAPSecondary Ledger allows view of Primary Ledger data under U.S. Germany U.K. India Secondary USD EUR GBP USDa change in COA, Calendar or Convention. Ledger 12/31 12/31 12/31 3/31 IFRS IFRS IFRS STAT Germany U.K.Reporting Ledger allows view of a Secondary Ledger in Reporting EUR EURdifferent currency, multiple currencies can be assigned Currencies 12/31 12/31 IFRS IFRS Users can access multiple legal entities and ledgers when logging into Oracle General Ledger using a single responsibility, leading Country to improved processing efficiency across enterprise. Currency Calendar Convention© 2012 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated 8with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 112808
  10. 10. Legal Entity Rationalization – R12 Integration Why does this matter to us? Legal Authorities  Legal entities are responsible for the following:  County, State, Local Level – Tax payments – need tax registrations in order to process  Agencies, Registrars, Regulators, Taxation, other payments – Trade between LEs (intercompany required) Regulates Complies – Ownership of the bank accounts, e.g., the money – Filing of accounts and reporting out of accounting Legal Entities – Complying with whatever requires “compliance” in an  Registered Companies, Partnerships, Funds organization, e.g., legal How does R12 satisfy?  Anything with an…Inc., LLC., Ltd., SA., GmBH., Other  By isolating the legal compliance from management needs, R12 allows you to track registered companies and enable Managed and Analyzed by: compliance to flow more easily.  R12 features around LE setups include: Management Organizations – Accounting setup manager  Divisions, Lines of Business, Cost Centers, Plants, etc. – E-business tax  Considered to be decision-making areas within the – Intercompany business – Bank model© 2012 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated 9with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 112808
  11. 11. Legal Entity Rationalization – BenefitsLegal entity rationalization and integration with the new Oracle R12 ledger structure will allow your organization to realize benefitsacross the tax, financial, and compliance areas of your business. Tax Benefits Financial Benefits Compliance Benefits  Enhanced public perception, i.e.,  Reduced costs of controller  Reduced number of tax return filings, overly complex structures may create functions, (ledger administration, VAT filings, payroll filings, and other confusion to auditors, lenders, rating account reconciliations, financial tax compliance, reporting, and agencies, investors, regulators, statements, and regulatory filings disclosure-related costs analysts, etc. preparation)  Improved usage of tax attributes  Reduced number of statutory audits  Improved consistency/transparency  Reduced transfer pricing complexity, in reporting  Potential reduction of external audit annual maintenance costs, audit fees  Reduced costs of maintenance of risks, etc. legal and financial records, etc.  Streamlined  Reduced nexus/permanent governance/simplification  Reduced monitoring of jurisdictional establishment risks through teams, consolidating accounts, sign-  Combined balance sheets, consolidated control of employee off reviews, etc. consolidated staffing, systems, which activities and operations may lead to and result in more  Improved liquidity due to reduced  Improved/simplified structure efficient deal closings, financing, capital requirements volume discounts, branding, etc.© 2012 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated 10with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 112808
  12. 12. Subledger Accounting (SLA) Oracle’s Subledger Accounting (SLA) functionality in R12 allows corporations to comply with corporate, local and managerial-level accounting and audit requirements. SLA rules can be defined by appropriate users which serve to support internal controls and policy, as well as create a streamlined methodology and close process. Journal Entry Setup Accounting Subledger Events Balances GL Accounting Journal Program Entries Subledger and Balances Transactions Journal Entries Accounting Configurations General Subledger Application SLA Ledger© 2012 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated 11with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 112808
  13. 13. Chart of Accounts – Guiding Principles for COA Design The Chart of Accounts (COA), or Accounting Flexfield (in Oracle terms) is designed to meet a company’s financial reporting requirements: – Profit and Loss, balance sheet, consolidated financial statements. Keep the design simple. Focus on what is needed to meet financial reporting requirements only. Data required to support analytics should be captured in the subject area subledger and/or data warehouse. It does not belong in the general ledger. The COA must be scalable. The COA should facilitate ease of data entry. Each segment should have one definition for its use across the business. Broad ranges should be used in each segment to accommodate parenting – “smart numbering” should be limited as possible. Aggregation of the data should be supported by the use of parenting structures. Although Oracle provides the capability, there should be no dependent segments. Prevent values other than null from starting with “0” to facilitate auto-fill data entry.© 2012 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated 12with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 112808
  14. 14. Purpose of the Code Block StructureAn integrated, enterprise-wide code block structure includes the chart-of-accounts structure, and other elements. Thecode block elements, including account, capture the key aspects of a transaction. An example of a code blockstructure follows: When? Who? What? How? Why? Where? Who? Period Company Department Account Product Location ICO Future The Code Block describes the following key aspects of a financial transaction:  When? – Defines the timing of the work performed  Who? – Identifies who performed the work on whose behalf  What? – Defines the nature of the work performed  How? – Defines the resource used to perform the work  Why? – Defines direct transactions related to a businesses core product  Where? – Identifies the location where work was performedOracle requires every segment to be populated for every transaction. You can assign one value to auto-fill (e.g., “0000”),or you can hide a segment (but it still exists and is auto-filled), but a full combination is always required and validated.© 2012 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated 13with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 112808
  15. 15. GL Account Segment QualifiersCost Center (required): the functional organization whereemployees are typically managed Segment Qualifiers are assigned to one segmentNatural Account (required): the resource used to performbusiness activitiesBalancing Segment (required): the organization thataccumulates balance sheet, income statement andintercompany reporting. One or more of these will make upa legal entity.Intercompany (optional): the organization who hadactivities performed on their behalf, the provider identifiedthrough the balancing segment organization.Management (optional): the segment for reporting andentry of management adjustments; it can be assigned toany segment except the natural account.Secondary Tracking (optional): facilitates tracking moredetail for year-end closing, translation, and revaluationactivities; it can be assigned to any segment except thebalancing, intercompany, or natural account segments.© 2012 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated 14with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 112808
  16. 16. GL Account Parent-child RelationshipsParent-child relationships allow you to create hierarchies for reporting and allocations.© 2012 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated 15with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 112808
  17. 17. GL Account Dynamic Insertion and Cross-validation RulesOracle allows combinations (all segments of the Chart of Accounts) to be created manually or dynamically. Cross-validation rulesare defined to validate each combination as it is potentially created systematically to allow/disallow its creation based oncompliance to those rules.© 2012 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated 16with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 112808
  18. 18. GL Account Security RulesSecurity rules, assigned to responsibilities, will manage access to using specific values across any Chart of Accounts segment.© 2012 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated 17with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 112808
  19. 19. GL Intercompany Transactions If the balancing segments values are in the same legal entity (intracompany accounting), the automatic balancing process uses cross­entity balancing rules to generate the balancing accounting entries. If the balancing segments values are in different legal entities (intercompany accounting), the automatic balancing routine uses intercompany accounts setup to create the balancing accounting lines. The automatic creation of payables and receivables invoices for intercompany transactions can be configured for local statutory compliance. The initiator organization is able to create a single batch containing multiple recipient transactions across different ledgers, currencies and calendars, which are automatically submitted to all recipients for approval.© 2012 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated 18with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 112808
  20. 20. Legal Entity Setups in R12Setup and Maintenance: Legal Entities, Establishments, Jurisdictions, Legal Authorities, Legal Addresses© 2012 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated 19with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 112808
  21. 21. Wrap-UpWhat did we learn today? What a general ledger is and is not Strategies and principles to guide Chart of Accounts build and efficiency Overview of the Oracle R12 architecture that can support a successful COA build Legal entity setups and benefits in R12 Subledger accounting in R12© 2012 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated 20with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 112808
  22. 22. Thank youPresented by:Christian Hambach, Director,KPMG LLPMatthew Mazzoni, Manager,KPMG LLP
  23. 23. © 2012 KPMG LLP, a Delaware limited liabilitypartnership and the U.S. member firm of the KPMGnetwork of independent member firms affiliated withKPMG International Cooperative (“KPMGInternational”), a Swiss entity. All rights reserved.NDPPS 112808The KPMG name, logo and “cutting throughcomplexity” are registered trademarks or trademarksof KPMG International.

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